Portfolio Update 10/26/07 S&P 500 is Crushed!

A good week brings us almost back to the highest Friday closing of any of the portfolios in this experiment ($53,896.62 acheived by the WylieMoney 20 Mostly Managed portfolio on 10/12/07).

The funds I hand picked are performing well against the Vanguard and ETF portfolios they are competing with.

Since May first, the WylieMoney 20 has done the best, crushing the performance of the S&P 500 as represented by SPY returning 7.61% compared to 3.74%. Year to date, the WylieMoney Slowly portfolio, which adds one fund a month in order picked, has handily beaten all the other portfolios earning 16.89%, including my actual Brokerage and Roth IRA which have returned 14.55% and 15.51% respectively! The Lazy 20 Mostly Index portfolio and the 3 Fund Index portfolio have done very well compared to the S&P 500 but have proven easy to beat.

Halloween will represent the 6 month mark for this experiment and after handing out candy, I will take a closer look at the results.

WylieMoney 20 Mostly Managed

Three Fund Index

Lazy 20 Mostly Index

WylieMoney Slowly

ETF 20

S&P 500

Go Red Sox!


Treasuries or Treasurys?

I grabbed this screen shot off CNNMoney yesterday. Hopefully you invest in Treasurys since they were on the rise due to low home sales. You would have been disappointed if you invest in Treasuries, which slipped due to the gain in home sales.

Apparently Wall Street wasn't alone in its muddle.


Portfolio Update 10/19/07 Capital Gains and Painful Losses

Something a bit strange happened on Friday. Sure the market tanked, but that's to be expected from time to time. After the market closed, I was looking at the carnage in the portfolios I track at morningstar.com and I saw that the WylieMoney Real Estate option: SSREX was down almost 18%.

20 years ago Friday, the Dow dropped 23% in one day, but this Friday it was only down 2.6%. Now SSREX and the Dow have very little in common, but the other Real Estate funds I track were all down more or less in line with the Dow. Another fund, SSEMX was down over 8% which was down sharply over the other Emerging Market funds I track.

I looked at other finance sites to see if maybe Morningstar had it wrong. Google finance still had Thursday's price listed. It is Sunday at 5:30 pm est and Google still shows Thursday's price. I guess their excuse is the little "BETA" under the "e".

Or, maybe they were distracted by their own stock, GOOG, one of the few companies up on the day.

I digress.

When a fund drops sharply out of sync with its market, the usual culprit is dividend or capital gains distributions and sure enough this is the case here.

The most significant flaw in my portfolio experiment is that I have no accurate way to incorporate the impact of taxes into the actual portfolio values. REITs or Real Estate Investment Trusts in particular can generate a 'large' tax bill as they do not receive many of the same tax benefits that equity funds do. Some argue you should not hold REITs in taxable accounts- that may be the case for your situation. Personally, I own BXP and REACX and have been pleased with the long term results. Maybe I just don't mind paying taxes when I'm making nice profits!

Anyway, once I 'reinvested' the distributions in the morningstar portfolios I use for this project, the WylieMoney 20 Mostly Managed portfolio looked even worse for the day, but maintains its hold on first place since May 1st. My Roth IRA slipped on the week, largely due to BXP being down over 8% in one week and the fact that 20% of the portfolio is invested in SPY which is in last place in this experiment.

Any way you cut it, the column "Today's $ Change" in the image above is a grim sight. Can you imagine if this was 1987?

WylieMoney 20 Mostly Managed

My Brokerage

Three Fund Index

Lazy 20 Mostly Index

My Roth IRA

WylieMoney Slowly

ETF 20

S&P 500


Portfolio Update 10/12/07 My Accounts Join the Race!

The WylieMoney 20 Mostly Managed Portfolio maintains the lead over all other portfolios in the experiment since my hypothetical purchase on May 1st. I added my own Roth IRA and Brokerage account to the competition and they come in 2nd and 3rd in % change since May 1st, respectively.

All the diverse portfolios, all of which include bonds and international equities, have handily beaten the S&P 500 as represented by the ETF SPY, year to date.

I added Janus Overseas to the WylieMoney Slowly Portfolio this week which is why it is now in last place in % Change Since Purchase. The $2500 I added to this portfolio is over 15% of the total value. Since this 15% is little changed since the purchase on Thursday, the overall % change 'since purchase" is lower than it would be without this fund. Year to date, this portfolio has out-performed all others with my Roth IRA right on its heels.

WylieMoney 20 Mostly Managed Portfolio Three Fund Index Portfolio Lazy 20 Mostly Index Portfolio ETF Portfolio S&P 500 WylieMoney Slowly Portfolio


My Brokerage and My Roth IRA

Recent comments on my blog inspired me to think about whether I recommend the investment strategy I am using for the investment portfolio experiment I have been working on for about a year.

A simple question that came up as I thought about that is, should I follow this strategy? I started investing in my brokerage account back in 1994. One day I'll tell that story -how I first got burned by a bank, then by Janus (which really means I burned myself!). That story explains a lot about how I but this strategy together.

But for now, I am going to add my investment accounts to the 'competition' so I can compare them to the hypothetical accounts I have been tracking. I do not follow this strategy exactly, but if a hypothetical portfolio blows my accounts away, I want to know about it!

Below are the holdings in my brokerage account and my IRA. I went back and determined the value of all holdings on May 1st and used the value of each holding on that date for the views below. So the Gain/Loss since purchase is the Gain/Loss since May 1st, not since I actually purchased them. This is so I can easily compare them to the hypothetical portfolios.

Click image for a larger view:

I bought Best Buy back in the 90's and it is up over 130% since then. Too bad I only invested in a few shares! I bought Janus Enterprise on March 6th, 2000. Allow me do demonstrate what a train wreck that's been:

You've got to be impressed with my timing!

When I post the update for this past week, I'll include these accounts in the mix. You'll see I've learned a thing or two. Over the years I held on to JAENX and added to it as it struggled and diversified beyond Janus. Both year to date and since May, my Brokerage has beat the index and ETF portfolios despite the fact that one of my largest holdings is BXP which is down over 5% since May and down for the year as well!


Portfolio Update 10/05/07 Up 7.51% Since May

In the sixth month of competition between 6 mutual fund portfolios, the low cost diverse mix of Mostly Managed funds known as the WylieMoney 20 maintains its lead with an increase of 7.51% since purchase.

All the portfolios are in the green, despite sub-prime mortgage concerns.

The single best performing fund from all the portfolios over this period is SSEMX SSgA Emerging Mkt (My Post) which is up a whopping 34.29% since May 1st. The worst performing fund is an ETF, VOE Vanguard Mid-Cap Value which has lost 2.02% but is still up over 6% Year to Date.

WylieMoney 20 Mostly Managed Portfolio

WylieMoney Slowly

Three Funds Index Portfolio

S&P 500

ETF 20

Lazy 20 Mostly Index Portfolio


Do I recommend this strategy?

I recently summarized the history of my Mutual Fund Portfolio Experiment and was asked:

"Do I recommend this strategy?"

The answer to that is, "It depends."

When thinking about how to invest you have to ask yourself a bunch of questions: What is your risk tolerance? What are your goals? What is your time horizon? etc.

Here are some thoughts in general:
  • I think looking at mutual funds is a good idea for a new investor as mutual funds offer a lot of diversity with little effort.
  • Funds with low initial investment minimums let you buy more than one fund with relatively little money, offering even greater diversification.
  • With the interwebs it is easy to find funds with low expenses and low turnover (which is important for investing in a taxable account).
  • No transaction fee no load funds are good to consider since they are less expensive to buy than other funds.
  • The funds I picked specifically allow $100 subsequent contributions for no fee so they are ideal for someone who wants to regularly contribute to their portfolio over time.
  • If you do not want to regularly contribute to the funds over time, in many (but not all) cases, there will be better options.

So I won't recommend this strategy to anyone specifically because I do not know their specific situation AND I'm not an adviser. But I do follow a strategy similar to this one myself for the account I try and add to consistently.

This specific experiment is meant to explore the process of investing in mutual funds. By explaining this process and providing regular updates, I hope to learn and to demonstrate what the process of investing can be like. When you watch a diverse portfolio of low cost mutual funds tank, how do you react? When the portfolios don't keep up with specific individual indexes you care about, how do you feel? Hopefully this will actually provide some context for you to think about your risk tolerance.

This experiment is also designed to look at Managed funds, Index funds, and ETFs side by side and see how they compare. I personally think a mix of all three makes sense depending on your situation and your goals.

I know this answer won't satisfy some people who want to be told what to do. For those of you who feel this way, you should have no problem finding an adviser who will charge you a nice fee to do just that. I don't recommend it though! An adviser might be a good idea, but don't let anyone tell you what to do about anything! Of course, I just told you what to do so if you take my advice you ignore my advice. See why you don't really need to worry about what I think anyway?

What I am going to do is set up my actual investment portfolios in morningstar and try and compare how my accounts perform next to the hypothetical ones. While I can't answer the question "Do I recommend this strategy?" for you, I suppose I should explore the question-"Should I follow this exact strategy, myself?"


Janus Overseas Next Mutual Fund for the WylieMoney Portfolio

I have been adding a new mutual fund each month to "WylieMoney Slowly," one of the portfolios I track. This month I wanted to add a Foreign- Small/Mid Growth fund. The fund I picked for the original "WylieMoney 20 Mostly Managed Portfolio" (ACFFX Columbia Acorn Intl Sel My Post) is now closed so I cannot "hypoethitcally" invest in it.

It turns out Etrade has no other funds with a $2500 minimum initial investment in this category. So I checked for a Foreign- Small/Mid Value Fund and found none.

Truth is, this is not the easiest category to invest in. For the "Lazy 20 Mostly Index Portfolio", this category is one of the few that had no index option. And the fund I picked for it (Foreign Small Growth - VINEX Vanguard Intl Explorer), is also closed to new investors.

So my pick for this month will be Foreign- Large Growth fund and the option is clear:

JAOSX Janus Overseas My Post

Janus Overseas is hotter than the hottest hotness. More important, it has low fees and low turnover.

So the next day the markets get pummeled, I'll add JAOSX to the WylieMoney Slowly portfolio.